The Importance of Maintaining Correct Mileage Records

Business travel can add up to a costly expense for many individuals, which is why deductions are offered at tax time to help alleviate the sting. In the case of mileage deductions, maintaining adequate records is extremely important to validate the expense, as the taxpayer in the following situation soon learned.

The Situation

The taxpayer drove 8,687 miles while distributing advertising materials in hope of attracting new clientele for his CPA business. When filing his tax return, the CPA claimed those miles as a business deduction, however the IRS denied the claim because his records were not simultaneous.

When in court, the taxpayer couldn’t provide a simultaneous record of his mileage for the appropriate year, and instead offered a calendar and copies of directions from the website MapQuest, printed two years after the fact. It became obvious that the records were produced after the audit had begun, and while some significant dates were circled on the calendar, there was no other information scribed – no miles driven, locations, appointments, or purpose of travel. The only information he supplied was the distance between his home and the towns in which he claimed to have performed business functions, as per MapQuest. The corresponding dates of travel had been written on top of each printout of directions, similar to the dates highlighted on the calendar.

The court determined the records (the calendar and the printouts) to have been organized two years after the fact, breaking the requirement set forth by Regulation section 1.274-5T(c)(2)(ii) that records must be maintained at the time of travel.

Additionally, because of the gap in time and the lack of information provided, the court decided that the directions and the calendar weren’t adequate and didn’t provide enough corroborative evidence to document the amount of business mileage, the purpose of travel, and the dates the business traveled occurred.